Through our transcriptional mapping effort in the Xp22 region, we have isolated by exon trapping a new transcript highly homologous to the Drosophila retinal degeneration C (rdgC) gene. rdgC encodes a serine/threonine phosphatase protein and is required in Drosophila to prevent light-induced retinal degeneration. This human gene is the first mammalian member of the serine-threonine phosphatase with EF hand motif gene family, and was thus named PPEF (Protein Phosphatase with EF calcium-binding domain). The expression pattern of the mouse Ppef gene was studied by RNA in situ hybridization on embryonic tissue sections. While rdgC is expressed in the visual system of the fly, as well as in the mushroom bodies of the central brain, we found that Ppef is highly expressed in sensory neurons of the dorsal root ganglia (DRG) and neural crest-derived cranial ganglia. The selective pattern of expression makes PPEF an important marker for sensory neuron differentiation and suggests a role for serine-threonine phosphatases in mammalian development.